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Coin Labs Weekly: Shopify, Amazon and the Future of Mobile Payments

Welcome to the first issue of the Coin Labs Newsletter! Each issue will contain my weekly article, my
Don Richard
Coin Labs Weekly: Shopify, Amazon and the Future of Mobile Payments
By Don Richard • Issue #1 • View online
Welcome to the first issue of the Coin Labs Newsletter! Each issue will contain my weekly article, my 5 favorite payments and mobile commerce reads from the past week, and a past Coin Labs article that I think you’ll enjoy. If you enjoy the newsletter, please share with your colleagues and friends!

Last week at Shopify’s annual developer conference, Shopify Unite, the company unveiled Shopify Pay, its latest attempt to increase merchant conversation rates and speed up the checkout process. After opt-ing into Shopify Pay on a participating merchant store, a customer will receive a 6-digit verification code via SMS during subsequent checkouts at Shopify stores. The code provides security and payment is linked to a customer’s email address. Shopify claims that the new service speeds up the checkout process by 40% and increases returning customer conversions by 18%.
Enhanced convenience and security aside, a few important details stuck out to me from the from the company’s blog post announcing the product launch:
Shopify Pay is safe and secure. Your customer’s information is encrypted and securely stored on Shopify’s PCI compliant servers. And, the SMS verification codes ensure that only the account owner can check out using Shopify Pay.
A few things should jump out about the paragraph above. First, Shopify is beginning to create an identity platform by leveraging the convenience of Shopify Pay. Second, Shopify is storing encrypted customer information on their own PCI compliant servers. This is a big deal. Up until now, Shopify has supported a variety of payments options from credit cards and debit cards to Apple Pay, Android Pay and PayPal.
Now Shopify is providing its own proprietary payment option (alongside the aforementioned third-party options), built specifically for the needs of its merchants and their customers. Combining identity with in-house payments processing will allow Shopify to control both the user experience and payments infrastructure end-to-end. This level of control is reminiscent of a revolutionary payment experience that changed the lansdcape of ecommerce — Amazon 1-Click.
The End-to-End Experience
I think we’ve seen the future of mobile payments in the U.S. It is developing in two ways:
  1. Retail merchant apps that combine customer identity, loyalty programs and seamless payment experience (e.g. Amazon, Walmart Pay and Starbucks’ mobile app).
  2. Cross-merchant platforms like Shopify.
Like so many other aspects of the internet, mobile payments success will accrue to large players with reach and scale, and smaller, niche players with a dedication to customer experience, community-building and differentiated product offerings. What these two ends of the spectrum have in common is a focus on controlling the user experience and payments infrastructure end-to-end.
The common assumption in the payments industry is that mobile web and in-app payments will solve adoption issues for Apple Pay and Android Pay (and mobile payments broadly). I’ve been guilty of this assumption in the past, but I’ve come to believe that it’s only half-right. Mobile web and in-app payments will spur adoption, but not for mobile wallets. Merchant apps and cross-merchant platforms that provide great, differentiated experiences for consumers will be the biggest mobile payments winners.
The Mobile Wallet Dilemma
The problem for mobile wallets is that their payment experience is just one piece of a checkout flow that is outside of their control. The danger here is that mobile wallets will catch on as payment option, but remain undifferentiated from other forms of payments. As I discussed in Instagram, Social Commerce and the Customer Funnel, there’s only one way to provide a differentiated payment experiences:
Commerce naturally sits on top of the payments layer, combining the latter’s utility with the identity-based and aspirational purchases we make. This is why mobile payments adoption is growing slower than the rate of mobile commerce adoption. Counter-intuitively, payment infrastructure and workflows aren’t the bottle neck in the value chain (the pieces are already there); it’s the next-generation of delightful commerce experiences that need to be unlocked.
The major mobile wallets (Apple Pay, Android Pay and Samsung Pay) have added additional functionality such as integrating banking and merchant loyalty programs, mass transit service, and airline boarding passes. While these services are useful, a recent PYMNTS study has shown that adoption has either stagnated or declined for the major mobile wallets in the U.S.
Consumers surveyed by PYMNTS even said that the mobile wallets were less convenient and harder to use than credit and debit cards. The data shows that U.S. consumers see no compelling reason to use mobile wallets on a consistent basis. This is fundamentally different than the obstacles for previous payments innovations (e.g. the rise of Visa and Mastercard charge cards). Those payment technologies took many years to grow adoption due to a lack of awareness and ubiquity at the merchant level, not unconvincing consumer value propositions.
What Lies Ahead for Mobile Payments
Mobile wallets have a major, though not insurmountable, hill to climb to rate comparably with plastic cards in the in-store payment department. Combine that with the fact that merchant apps and cross-merchant platforms are innovating in the user experience department by solving real consumer pain points, and it becomes more likely that the future of mobile payments looks more like Shopify Pay than Apple Pay.
This Week's Top 5 Mobile Commerce Reads
Walmart is reverting to its old strategy of hoping small investments will yield big changes. Perhaps Walmart needs to think more ambitiously about how it will look in 10 years.
The study found 52 percent of respondents who said they start their online purchasing process at Amazon, which is up from 47 percent last year, and 38 percent from the year prior.
BuzzFeed’s operation stands out for the size of the team working on it as well as the lengths it’s going to to grow the business. Case in point: BuzzFeed just built its own software tool that helps onboard more shopping sites that give BuzzFeed a cut of sales, and to help its writers estimate how much revenue a certain post will generate.
According to Tencent, the iPhone maker said developers would be barred from including buttons or links that direct customers to purchasing systems outside of its iOS ecosystem.
The story of our outsize concern for coal and manufacturing, or rather our indifference to the collapse of retail, is inescapably the story of how worth, value, and citizenship are still tied to those traits we can’t control.

Coin Labs Vault
Of all the Facebook’s properties, Instagram stands out as the most viable centerpiece of a commerce strategy. The service is visual, already drives inspiration and aspiration for many users, and can leverage Facebook’s real identity platform in a way that is contextual for commerce.

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Don Richard

Coin Labs Newsletter - The Business Strategy and Analysis of Mobile Commerce and Fintech

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